Impact of Google searches and social media on digital assets' volatility

Advanced digitalization and financial technology have of recent times become among the most crucial tools. Data mining and sentiment analysis have revealed the importance of digitalization in modern times. This study examines the influence of Google search activity on the volatility of digital assets. We analyzed six digital asset prices for Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin, and Ripple from the Coinmarketcap database. We used tweets on Twitter to survey users' sentiment by using the Twitter search Application Programming Interface and Google trend search from web searches, news searches, and YouTube searches data using RStudio software. The study spanned 1 September 2019 to 31 January 2020 and employed the Vector Autoregression (VAR) approach for analysis. The VAR estimation revealed that Google search variables have significantly influenced the volatility of Bitcoin, Ethereum, Litecoin, and Ripple, as supported by the Granger causality test and impulse response function. The results of this study could be useful for investors and policymakers in drawing up strategies to reduce market volatility. These results should thus be useful to investors in developing profitable investment strategies to mitigate the impact of market turbulence.

Fathin Faizah Said, Raja Solan Somasuntharam, Mohd Ridzwan Yaakub, Tamat Sarmidi